Price and Cost Impacts of Concentration in Food Manufacturing Revisited

This study estimates the elasticities of wholesale food prices, cost efficiency, and
market power with respect to industrial concentration in 35 food processing industries,
modifying the model of Lopez, Azzam, and Lirón-España (2002). In contrast
to the results of their earlier analysis, findings of this study indicate that further
increases in concentration would result in significant processing cost savings (and
Lerner index increases) in nearly all industries and that output prices would decline
in nearly 50% of the industries, although significantly so in only 20% of them. As
industrial concentration rises, price declines occur in industries with low levels of
concentration while price increases occur in highly concentrated industries.